Banks not only ones to deny loans

Banks not only ones to deny loans



By Jamie Ee Wen Wei and Estelle Low

If getting a bank loan is now proving difficult, turning to legal moneylenders may not help either.

In the current economic crisis, moneylenders, like banks, are also tightening the screws on credit.

Of the 10 licensed moneylenders whom The Sunday Times spoke to, almost all said they are now more cautious in doing business.

Some said they are doing more detailed checks while others are doling out smaller amounts, limiting a loan to twice that of a person's salary.

Mr Desmond Koo, who runs JBM Credit, said he now asks more questions to determine a client's credibility. 'Lending money is very easy but getting it back is very hard,' he said.

Ms Shirley Chong, who has been operating W E Chong Credit Enterprise for more than 20 years, said she does business only with regular customers now.

'We are running a small business. Now that so many people are getting retrenched and the economy is so bad, how are we going to get back our money?' she said of possible defaulters.

Some moneylenders said they are already encountering more defaulters. One moneylender, who declined to be named, is still trying to recover $50,000 after she stopped operations a year ago.

There are about 170 licensed moneylenders under the Registry of Moneylenders. Most are sole proprietors and they usually give small, short-term loans.

Most of their clients seek personal loans to cover expenses such as hospital bills, wedding banquets, mortgages and, sometimes, debts to loan sharks. A handful ask for business loans.

They are mostly men aged between 30 and 50. They may borrow between $1,000 and $30,000 at an interest rate of 12 to 18 per cent a year. This has to be paid monthly while the loan has to be settled within a year.

Increasingly, moneylenders said they are seeing desperate borrowers who have lost money in the stock markets or lost their jobs.

In fact, demand for loans is so high that moneylenders said they are fielding more than double the calls they used to get.

Madam Gowri G.K., who runs a moneylending business in Serangoon, said she used to get about four inquiries every month. Last December, there were at least 15 calls.

As a rule, borrowers must be able to produce their payslip, have a guarantor, and pass the checks with the Credit Bureau of Singapore.

Mr David Poh, president of Moneylenders' Association of Singapore, said: 'If they are unemployed or cannot get a good guarantor, they will be turned away. The economy is so bad, it's even harder to get a guarantor now.'

Mr Alex Chua (not his real name) knows about the credit crunch. When the customer service officer tried to borrow $14,000 from banks to help a friend clear gambling debts in December, he was turned down by all.

He thought he would have better luck with the moneylenders, but all 20 he contacted rejected him as his loan amount was more than twice his monthly pay of $1,500.

'It was a very frustrating experience. The rules are just too strict,' he said.

But over the next two months, moneylenders may find reason to ease their lending.

In November last year, the Government lifted several longstanding restrictions on the industry, which will allow moneylenders to set higher interest rates and advertise their business.

Mr Poh said these changes, to combat the loan-shark trade, will kick in within the next two months.

In the meantime, moneylenders are aware that the current credit squeeze could drive more people to loan sharks.

Latest figures from the police showed an increase in the number of reported cases of unlicensed moneylending and harassment - from 9,765 in 2007 to 11,789 last year.

The number of persons arrested for unlicensed moneylending and harassment rose from 390 in 2007 to 505 last year.

One moneylender, who declined to be named, said he advises his clients to avoid loan sharks when he is unable to grant them a loan.

For those with loans and who have lost their jobs, he would rework the payment plan with them.

He said: 'The interest rates for loan sharks are so high. If they cannot pay up, anything can happen,' he said.

This article was first published in The Straits Times on February 01, 2009.